Enkhzaya Impact of Institutions on Lending
2006
ISBN: 978-3-8350-9007-1
Verlag: Deutscher Universitätsverlag
Format: PDF
Kopierschutz: 1 - PDF Watermark
Informal Constraints and Enforcement of Bank Regulation in Mongolia
E-Book, Englisch, 196 Seiten, eBook
ISBN: 978-3-8350-9007-1
Verlag: Deutscher Universitätsverlag
Format: PDF
Kopierschutz: 1 - PDF Watermark
Chuluunbaatar Enkhzaya examines the 'inadequate' behaviour of banks in Mongolia by analysing the institutional framework of the banking system, especially in lending. She focuses on the genesis of informal institutions of lending and their interaction with formal institutions of lending. Herewith, informal institutions such as the attitude to risk were indirectly observed by diagnosing the 'action-regulating' knowledge of bankers. In order to ensure an effective allocation of the scarce financial resources of Mongolia the author therefore suggests a change - as simultaneous as possible - of formal and informal rules.
Dr. Chuluunbaatar Enkhzaya promovierte bei Prof. Dr. Alexander Karmann am Lehrstuhl für Geld, Kredit und Währung der Fakultät Wirtschaftswissenschaften der Technischen Universität Dresden. Sie ist als freiberufliche Beraterin für Regierungen und Unternehmen tätig.
Zielgruppe
Research
Weitere Infos & Material
1;Foreword;8
2;Preface;10
3;Overview;12
4;Table of Contents;14
5;Index of Tables;18
6;Index of Figures;20
7;Abbreviations;22
8;Introduction;25
8.1;Motivation;25
8.2;Research Questions;27
8.3;Structure;28
9;Part 1 The Impact of Institutions on Lending;31
9.1;1.1 The New Institutional Economics;31
9.1.1;1.1.1 Institutions Matter;31
9.1.2;1.1.2 Institutions in Economic Science: the New Institutional Economics;35
9.1.3;1.1.3 The Theory of Economic and Institutional Change;40
9.2;1.2 Institutional Framework of Lending;48
9.2.1;1.2.1 Applying NIE to Lending;48
9.2.2;1.2.2 Institutional Framework of Lending in Transition;51
9.3;1.3 Cognitive Approach to Analysing Institutions of Lending;58
9.3.1;1.3.1 Cognitive Approach to Institutional Analysis: Institutions, Mental Models and Knowledge;58
9.3.2;1.3.2 Models of Knowledge Organisation and Elicitation of Action-Regulating Knowledge;64
9.3.3;1.3.3 Bankers' Action-Regulating Knowledge in Lending;71
10;Part 2 The Economic and Banking Situation in Mongolia;73
10.1;2.1 The State of Economic Transition in Mongolia;73
10.1.1;2.1.1 The Historical and Political Background of the Mongolian Economy;73
10.1.2;2.1.2 The Stylised Facts of Transformation;77
10.1.3;2.1.3 Institutions in Transition;80
10.2;2.2 Performance of Lending Organisations in Mongolia;83
10.2.1;2.2.1 Financial Intermediation and the Role of Lending;83
10.2.2;2.2.2 Bank Behaviour: Loan Allocation and Lending Uncertainties;89
10.3;2.3 Institutions of Lending in Mongolia: Some Hypotheses;94
10.3.1;2.3.1 Incentives Shaped by Existing or Missing Institutions of Lending;94
10.3.2;2.3.2 Formal Institutions of Lending: Bank Regulation Norms on Lending Activity;97
10.3.3;2.3.3 The Inconsistency of Informal Institutional Constraints with Formal Norms;101
11;Part 3 Discrepancy between Bank Regulation Norms and Lending Practice in Mongolia;105
11.1;3.1 Diagnosing Action-Regulating Knowledge (Method);105
11.1.1;3.1.1 Research Design and Methods;105
11.1.2;3.1.2 Concept Mapping as a Tool Based on Cognitive Science;109
11.1.3;3.1.3 Diagnosing the Action-Regulating Knowledge of Bankers with Concept Mapping;116
11.2;3.2 Bankers' Mental Model on Lending (Survey);118
11.2.1;3.2.1 Sampling;119
11.2.2;3.2.2 Instrumentation: Key Concepts and Questions;122
11.2.3;3.2.3 Procedure;131
11.3;3.3 Lending Practice and Bank Regulation (Results);134
11.3.1;3.3.1 Data Analysis;134
11.3.2;3.3.2 Findings;160
12;Part 4 Institutions Building and Adjustment of Bank Regulation Norms in Mongolia;169
12.1;4.1 Discussion of Findings on Informal Constraints with Respect to Formal Institutions;169
12.1.1;4.1.1 Informal Constraints of Lending in Mongolia;169
12.1.2;4.1.2 Incompatibility of Informal Institutions with Formal Institutions;171
12.2;4.2 Implications and Future Challenges;173
12.2.1;4.2.1 Restructuring the Overall Institutions Over Time;173
12.2.2;4.2.2 Approaches to Institution Building in Lending in Mongolia;175
13;Part 5 Conclusions;183
14;Annex 1: Reserve requirements for Mongolian banks;189
15;Annex 2: Prudential ratios for Mongolian banks;190
16;Annex 3: Concepts of sub-domain " Banking and Bank Supervision" (map III);192
17;Annex 4: Reference map for action-regulating knowledge on sub-domain "Banking and Bank Supervision";193
18;Annex 5: Individual Interview Sheet;194
19;Annex 6: Lending procedure (complete version);195
20;Annex 7: Control roster for data collection during documents and records observation;197
21;Annex 8: Schedule plan for data collection;198
22;Annex 9: Summing-up the rough evaluation results of map II "Credit Risk Management and Credit Approval";201
23;Annex 10: Summing-up the rough evaluation results of map III "Banking and Bank Supervision";202
24;Annex 11: Cumulated matrix for map III "Banking and Bank Supervision";203
25;Annex 12: Model of observation matrix: categories and Information units (notes and sources);205
26;References;207
The Impact of Institutions on Lending.- The Economic and Banking Situation in Mongolia.- Discrepancy between Bank Regulation Norms and Lending Practice in Mongolia.- Institutions Building and Adjustment of Bank Regulation Norms in Mongolia.
Introduction (p. 1)
Motivation
When In the early 1990s the post-communist countries implemented reform programmes to transform their previously centrally-planned economies into marketbased economies, an unprecedented "transition" was set in motion and the economies in transition (EIT) emerged. This change of economic co-ordination should lead to a more efficient use of resources with higher economic output. Closely monitored and financially supported by international organisations, such as the International Monetary Fund (IMF), the process of transition consisted of three main elements: privatisation, liberalisation and stabilisation.
It was assumed that liberalisation of prices and the creation of private property would result in the establishment of many enterprises, and competition between these would lead to an efficient allocation of resources and stabilisation. Yet these big bang reforms implying rapid transition process were nevertheless followed by so-called transition crises - especially in south-east European and central Asian EITs - from which many countries are still suffering.
The liberalisation of prices in Mongolia led to immoderately high inflation, peaking at 325 percent in 1992 and remaining in double-digits until the late 1990s. Aggregate output subsequently started to decline, reaching its lowest level in 1995. Stagnation continued long into the late 1990s before picking up to record a growth rate of 3.9 percent in 2002. Whereas the inflation rate has fallen and growth revived in the meantime, the loss of confidence in the national currency, the Tugrug, is proving difficult to restore. Some studies in this context put the Dollarisation ratio in Mongolia at up to 80 percent (Herr, 2003).
The low degree of macroeconomic achievement was put down to the absence of responsive microeconomic reforms. The global big bang strategy based on Neoclassic theory consisted of macroeconomic policies which assume a market mechanism that functions automatically, as if the market suddenly materialises by magic. The strategy neither considered the time needed to establish the market, nor dealt with this process itself. However, if the economic agents in EITs - enterprises, banks, households, the state - do not behave as economic agents do in market economies, the market mechanism cannot operate as it is supposed to.
Thus microeconomic reforms aimed at establishing the market and inducing supposed market-oriented behaviour need to be adjusted so that macroeconomic reform policies can realise the initial expectations. The economic literature on transition processes deals for the most part with the macroeconomics of transition, yet conditions at the microeconomic level are unfortunately almost ignored or taken for granted.
The existing models - be these Keynesian, Neo-classic or Monetarist - believe in creating market economies overnight. New Institutional Economics (NIE) includes factors constraining the behaviour of economic agents - institutions - into the corpus of Neo-classic theory and legitimates them as objects of economic analysis. Defined as the "rules of the game" by North (1990: 4), institutions constrain individual behaviour and thus define the outcomes which result from individual action (Schotter, 1986: 117).
Both formal institutions - laws and regulations - and informal institutions, such as codes of conduct, canalise individual behaviour. In a world of positive transaction costs - due to market imperfections inter alia - institutions and their design are the root of many problems in the EITs.
